What changed in this filing

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Item 1. Financial Statements

2021-06-04 compared with 2020-12-03 · 107 added, 234 removed, 446 unchanged (43% of the section changed)

1 unchanged sentence

TITAN MACHINERY INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)

October 31, 2020 January 31, 2020

April 30, 2021 January 31, 2021

Current Assets

21 unchanged sentences

Accrued expenses and other 37,110 48,791

Income taxes payable 14,508 11,048

Total current liabilities 310,205 317,500

2 unchanged sentences

Operating lease liabilities 69,030 73,567

Deferred income taxes 5,814 2,055

Other long-term liabilities 7,555 8,535

Total long-term liabilities 141,453 127,008

Commitments and Contingencies

Commitments and Contingencies (Note 15)

Stockholders' Equity

Common stock, par value $ .00001 per share, 45,000 shares authorized;

22,555 shares issued and outstanding at October 31, 2020;

22,520 shares issued and outstanding at April 30, 2021;

22,553 shares issued and outstanding at January 31, 2021

1 unchanged sentence

Retained earnings 127,416 116,869

Accumulated other comprehensive loss ( 789 ) ( 3,220 )

Accumulated other comprehensive income (loss) ( 880 ) 1,499

Total stockholders' equity 379,083 371,281

2 unchanged sentences

TITAN MACHINERY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)

Three Months Ended October 31, Nine Months Ended October 31,

2020 2019 2020 2019

Three Months Ended April 30,

Equipment $ 275,980 $ 218,505

11 unchanged sentences

Operating Expenses 56,442 53,058

Impairment of Goodwill 1,453 — 1,453 —

Impairment of Intangible and Long-Lived Assets — 216

1 unchanged sentence

Other Income (Expense)

Interest and other income (expense) ( 360 ) 1,273 333 2,687

Interest and other income 665 130

Floorplan interest expense ( 418 ) ( 1,152 )

11 unchanged sentences

TITAN MACHINERY INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

Three Months Ended October 31, Nine Months Ended October 31,

2020 2019 2020 2019

Three Months Ended April 30,

Net Income $ 10,547 $ 2,262

Other Comprehensive Income (Loss)

Other Comprehensive Loss

Foreign currency translation adjustments ( 2,379 ) ( 528 )

2 unchanged sentences

TITAN MACHINERY INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

(in thousands)

2 unchanged sentences

BALANCE, January 31, 2020 22,335 $ — $ 250,607 $ 97,717 $ ( 3,220 ) $ 345,104

Cumulative-effect adjustment of adopting ASC 842, Leases — — — ( 5,464 ) — ( 5,464 )

Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax ( 34 ) — ( 492 ) — — ( 492 )

Stock-based compensation expense — — 603 — — 603

Net loss — — — ( 445 ) — ( 445 )

Other comprehensive loss — — — — ( 771 ) ( 771 )

BALANCE, April 30, 2019 22,184 — 248,534 83,319 ( 3,111 ) 328,742

Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 170 — — — — —

Stock-based compensation expense — — 694 — — 694

Net Income — — — 5,511 — 5,511

Other comprehensive income — — — — 1,012 1,012

BALANCE, July 31, 2019 22,354 — 249,228 88,830 ( 2,099 ) 335,959

Cumulative-effect adjustment of adopting ASC 326, Financial Instruments - Credit Losses — — — ( 204 ) — ( 204 )

2 unchanged sentences

Other comprehensive loss — — — — ( 528 ) ( 528 )

BALANCE, October 31, 2019 22,352 $ — $ 249,984 $ 97,044 $ ( 4,749 ) $ 342,279

BALANCE, April 30, 2020 22,314 $ — $ 251,051 $ 99,775 $ ( 3,748 ) $ 347,078

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity

1 unchanged sentence

BALANCE, January 31, 2021 22,553 $ — $ 252,913 $ 116,869 $ 1,499 $ 371,281

Cumulative-effect adjustment of adopting ASC 326, Financial Instruments - Credit Losses — — — ( 204 ) — ( 204 )

Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax ( 33 ) — ( 975 ) — — ( 975 )

3 unchanged sentences

BALANCE, April 30, 2021 22,520 $ — $ 252,547 $ 127,416 $ ( 880 ) $ 379,083

Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 239 — — — — —

Stock-based compensation expense — — 536 — — 536

Net income — — — 6,400 — 6,400

Other comprehensive income — — — — 778 778

BALANCE, July 31, 2020 22,553 — 251,587 106,175 ( 2,970 ) 354,792

Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 2 — ( 8 ) — — ( 8 )

Stock-based compensation expense — — 691 — — 691

Net income — — — 9,912 — 9,912

Other comprehensive income — — — — 2,181 2,181

BALANCE, October 31, 2020 22,555 $ — 252,270 $ 116,087 $ ( 789 ) $ 367,568

See Notes to Consolidated Financial Statements

TITAN MACHINERY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Nine Months Ended October 31,

Three Months Ended April 30,

Operating Activities

2 unchanged sentences

Depreciation and amortization 5,207 5,375

Impairment 2,771 186

Impairment of long-lived assets — 216

Deferred income taxes ( 1,008 ) 117

14 unchanged sentences

Proceeds from sale of property and equipment 135 313

Acquisition consideration, net of cash acquired ( 6,790 ) ( 11,752 )

Other, net 7 ( 21 )

2 unchanged sentences

Net change in non-manufacturer floorplan payable ( 9,141 ) 18,781

Principal payments on senior convertible notes — ( 45,644 )

Proceeds from long-term debt borrowings 6,462 1,112

16 unchanged sentences

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

5 unchanged sentences

(the “Company”) are subject to fluctuation due to varying weather patterns, which may impact the timing and amount of equipment purchases, rentals, and after-sales parts and service purchases by the Company’s Agriculture, Construction and International customers.

Therefore, operating results for the nine-month period ended October 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2021.

Therefore, operating results for the three-month period ended April 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2022.

The information contained in the consolidated balance sheet as of January 31, 2021 was derived from the audited consolidated financial statements of the Company for the fiscal year then ended.

2 unchanged sentences

The Company is engaged in the retail sale, service and rental of agricultural and construction machinery through its stores in the United States and Europe.

The Company’s North American stores are located in Arizona, Colorado, Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wisconsin and Wyoming, and its European stores are located in Bulgaria, Germany, Romania, Serbia and Ukraine.

The Company’s North American stores are located in Colorado, Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wisconsin and Wyoming, and its European stores are located in Bulgaria, Germany, Romania, Serbia and Ukraine.

Impact of the COVID-19 Pandemic

1 unchanged sentence

The nature of COVID-19 led to worldwide shutdowns and halting of commercial and interpersonal activity as governments imposed regulations in efforts to control the spread of the pandemic, such as shelter-in-place orders and quarantines.

The pandemic is a highly fluid and rapidly evolving situation, and we cannot anticipate with any certainty the length, scope, or severity of such restrictions in each of the markets that we operate.

Since the beginning of the COVID-19 pandemic, the safety of our employees and customers has been and continues to be our top concern.

At the onset of the pandemic, we organized a COVID Task Force to implement safety protocols and to quickly respond to matters, in the event of positive cases at any of our locations.

Even though we are considered an essential business, in response to the COVID-19 pandemic, the Company closed its U.S.

stores to the public in March 2020 but continued operations through social distancing means in all areas:

equipment, parts, service and rental.

Beginning in May 2020, we began fully reopening our stores to the public, following pandemic safety protocols, and by June 2020 all of our locations were once again open to the public.

Additionally, our International stores have also been following pandemic safety protocols set forth by each country and local government authority, which at times have included border shutdowns and curfew regulations.

The Company's products and services were determined to be essential in the markets we serve and accordingly operations have been allowed to continue throughout the pandemic.

Certain of the Company's supply vendors are facing production and staffing challenges as they work to achieve production capacity and lead times consistent with pre-pandemic levels.

The pandemic has created other supply chain challenges such as delays in components and supplies and freight markets continue to have challenges with driver shortages, strong demand for consumer goods, extended lead times, and driver retention and recruitment issues.

As a result, the Company has experienced some disruptions and delays on delivery of certain materials.

The Company has assessed the impacts of the COVID-19 pandemic on its results of operations for the three months ended April 30, 2021 and 2020, and although there have been logistical and other challenges, no material adverse impacts were identified.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

3 unchanged sentences

All material accounts, transactions and profits between the consolidated companies have been eliminated in consolidation.

Recently Adopted Accounting Guidance

In June 2016, the Financial Accounting Standards Board ("FASB") issued a new standard, codified in Accounting Standard Codification ("ASC") 326, Financial Instruments - Credit Losses , that modifies how entities measure credit losses on most financial instruments.

The new standard replaced the "incurred loss" model with an "expected credit loss" model that requires consideration of a broader range of information to estimate expected credit losses over the lifetime of the asset.

The guidance impacts the Company on its accounts receivable portfolio but specifically excluded receivables from operating lease arrangements and, therefore, the Company’s receivables from rental contracts were not impacted.

The guidance also requires new disclosures to allow the users of the financial statements to understand the credit risk inherent in a portfolio and how management monitors the credit quality of the portfolio, management’s estimate of expected credit losses, and changes in the estimate of expected credit losses that have taken place during the reporting period.

The Company adopted the new guidance on February 1, 2020 using a modified retrospective approach and recognized an immaterial cumulative-effect adjustment to retained earnings as of the effective date.

The Company identified and updated existing internal controls and procedures to ensure compliance with the new guidance, but such modifications were not deemed to be material to the Company's overall system of internal control.

While the adoption of this standard did not have a material impact on the Company's consolidated financial statements, it required changes to the Company's process of estimating expected credit losses on trade receivables.

See footnote 4 for further discussion of our accounts receivables.

In February 2018, the FASB issued guidance on the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract, codified in ASC 350-40, Internal Use Software .

This guidance aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software.

The Company adopted this standard on February 1, 2020, using the prospective transition approach.

The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Accounting Guidance Not Yet Adopted

In March 2020, the FASB issued Accounting Standard Update ("ASU") No.

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update ("ASU") No.

2020-04 , Reference Rate Reform (Topic 848):

2 unchanged sentences

ASU 2020-04 is effective upon issuance and can be applied through December 31, 2022.

The Company is currently evaluating its contracts and hedging relationships that reference LIBOR to determine if the Company will adopt the new guidance.

The Company is updating its credit agreements to include language regarding the successor or alternate rate to LIBOR, and a review of other contracts and agreements is on-going.

The Company does not expect the guidance to have a material impact on its results of operations, financial position, cash flows, or disclosures.

NOTE 2 - EARNINGS PER SHARE

The following table sets forth the calculation of basic and diluted EPS:

Three Months Ended October 31, Nine Months Ended October 31,

2020 2019 2020 2019

The following table sets forth the calculation of basic and diluted Earnings Per Share (EPS):

Three Months Ended April 30,

(in thousands, except per share data)

13 unchanged sentences

The following tables present our revenue disaggregated by revenue source and segment:

Three Months Ended October 31, 2020 Three Months Ended October 31, 2019

Agriculture Construction International Total Agriculture Construction International Total

(in thousands) (in thousands)

Three Months Ended April 30, 2021

Agriculture Construction International Total

(in thousands)

Equipment $ 169,257 $ 44,812 $ 61,911 $ 275,980

6 unchanged sentences

Total revenues $ 229,554 $ 68,608 $ 74,544 $ 372,706

Nine Months Ended October 31, 2020 Nine Months Ended October 31, 2019

Agriculture Construction International Total Agriculture Construction International Total

(in thousands) (in thousands)

Three Months Ended April 30, 2020

Agriculture Construction International Total

(in thousands)

Equipment $ 139,749 $ 34,253 $ 44,503 $ 218,505

7 unchanged sentences

Unbilled Receivables and Deferred Revenue

Unbilled receivables amounted to $ 16.8 million and $ 13.9 million as of October 31, 2020 and January 31, 2020.

Unbilled receivables from contracts with customers were $ 17.0 million and $ 12.9 million as of April 30, 2021 and January 31, 2021.

The increase in unbilled receivables is primarily the result of a seasonal increase in the volume of our service transactions in which we recognize revenue as our work is performed and prior to customer invoicing.

Deferred revenue from contracts with customers amounted to $ 13.7 million and $ 39.5 million as of October 31, 2020 and January 31, 2020.

Deferred revenue from contracts with customers were $ 47.6 million and $ 57.7 million as of April 30, 2021 and January 31, 2021.

Our deferred revenue most often increases in the fourth quarter of each fiscal year due to a higher level of customer down payments or prepayments and longer time periods between customer payment and delivery of the equipment asset, and the related recognition of equipment revenue, prior to its seasonal use.

During the three months ended October 31, 2020 and 2019, the Company recognized $ 3.9 million and $ 2.5 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2020 and January 31, 2019, respectively.

During the nine months ended October 31, 2020 and 2019, the Company recognized $ 40.9 million and $ 43.7 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2020 and January 31, 2019, respectively.

No material amount of revenue was recognized during the three and nine months ended October 31, 2020 and 2019 from performance obligations satisfied in previous periods.

The following is a summary of deferred revenue as of October 31, 2020 and January 31, 2020:

October 31, 2020 January 31, 2020

(in thousands)

Deferred revenue from contracts with customers $ 13,687 $ 39,512

Deferred revenue from rental and other contracts 1,021 1,456

$ 14,708 $ 40,968

The Company has elected as a practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of service of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

During the three months ended April 30, 2021 and 2020, the Company recognized $37.9 million and $29.7 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2021 and January 31, 2020, respectively.

No material amount of revenue was recognized during the three months ended April 30, 2021 and 2020 from performance obligations satisfied in previous periods.

The contracts for which the practical expedient has been applied include (i) equipment revenue transactions, which do not have a stated contractual term, but are short-term in nature, and (ii) service revenue transactions, which also do not have a stated contractual term but are generally completed within 30 days and for such contracts we recognize revenue over time at the amount to which we have the right to invoice for services completed to date.

10 unchanged sentences

Trade and unbilled receivables from rental contracts are primarily in the United States and are specifically excluded from the accounting guidance in determining an allowance for expected losses.

The Company does provide an allowance for these receivables based on historical experience and using credit information obtained from continued monitoring of customer accounts.

October 31, 2020 January 31, 2020

The Company provides an allowance for these receivables based on historical experience and using credit information obtained from continued monitoring of customer accounts.

April 30, 2021 January 31, 2021

(in thousands)

15 unchanged sentences

Agriculture Construction International Total

Balance at February 1, 2020 $ 181 $ 1,016 $ 1,746 $ 2,943

(in thousands)

Balance at January 31, 2021 $ 228 $ 1,074 $ 1,690 $ 2,992

Current expected credit loss provision 30 68 ( 2 ) 96

3 unchanged sentences

Balance at April 30, 2021 $ 241 $ 1,062 $ 1,600 $ 2,903

Current expected credit loss provision 16 95 265 376

Write-offs charged against allowance 47 78 98 223

Credit loss recoveries collected 9 — — 9

Foreign exchange impact — — 23 23

Balance at July 31, 2020 208 1,079 2,006 3,293

Agriculture Construction International Total

(in thousands)

Balance at February 1, 2020 $ 181 $ 1,016 $ 1,746 $ 2,943

Current expected credit loss provision 14 113 226 353

2 unchanged sentences

Foreign exchange impact — — ( 29 ) ( 29 )

Balance at October 31, 2020 $ 196 $ 1,088 $ 1,769 $ 3,053

Balance at April 30, 2020 $ 230 $ 1,062 $ 1,816 $ 3,108

The following table presents impairment losses (recoveries) on receivables arising from sales contracts with customers and receivables arising from rental contracts:

Three Months Ended October 31, Nine Months Ended October 31,

2020 2019 2020 2019

Three Months Ended April 30,

(in thousands)

2 unchanged sentences

Receivables from rental contracts ( 34 ) 138

$ ( 272 ) $ 357 $ 399 $ 1,840

NOTE 5 - INVENTORIES

October 31, 2020 January 31, 2020

April 30, 2021 January 31, 2021

(in thousands)

5 unchanged sentences

NOTE 6 - PROPERTY AND EQUIPMENT

October 31, 2020 January 31, 2020

April 30, 2021 January 31, 2021

(in thousands)

8 unchanged sentences

The Company reviews its long-lived assets for potential impairment whenever events or circumstances indicate that the carrying value of the long-lived asset (or asset group) may not be recoverable.

During the three months ended October 31, 2020, the Company determined, based on changing expectations regarding the future use of certain long-lived assets, that the $0.8 million carrying value of these assets, may not be recoverable.

The Company performed an impairment assessment of this asset group and, as a result, recognized an impairment charge of $ 0.2 million within its Agriculture segment for the three months ended October 31, 2020.

For the nine months ended October 31, 2020, the Company recognized a total impairment charge of $ 0.2 million within its Construction segment and a $ 0.2 million impairment charge within its Agriculture segment.

For the three and nine months ended October 31, 2019, the Company recognized an impairment charge of $ 0.1 million and $ 0.2 million, respectively, within its Construction segment.

In March 2019, the Company completed an assessment of its Enterprise Resource Planning ("ERP") application and concluded that the Company would begin the process to prepare for conversion to a new ERP application.

The Company integrated one pilot store on the new ERP system in the second quarter of the fiscal 2021 and expects all domestic stores to be on the new ERP application during the second or third quarter of fiscal 2022.

We have prospectively adjusted the useful life of our current ERP application such that it will be fully amortized upon its estimated replacement date.

The net book value of the current ERP asset of $0.8 million as of October 31, 2020 will be amortized on a straight-line basis over the estimated remaining period of use.

NOTE 7 - INTANGIBLE ASSETS AND GOODWILL

The following is a summary of the changes in goodwill, by segment, for the period ended October 31, 2020:

Agriculture Construction International Total

(in thousands)

January 31, 2020 $ 949 $ — $ 1,378 $ 2,327

Arising from business combinations 484 — — 484

Foreign currency translation — — 75 75

Impairment — — ( 1,453 ) ( 1,453 )

October 31, 2020 $ 1,433 $ — $ — $ 1,433

The Company performs at least an annual impairment testing of goodwill and, due to ongoing losses and the impact of COVID-19, an interim impairment test was performed in the third quarter of fiscal 2021 for our Germany reporting unit.

Under the impairment test, the fair value of the reporting unit is estimated using an income approach in which a discounted cash flow analysis is utilized, which includes a five-year forecast of future operating performance for the reporting unit and a terminal value that estimates sustained long-term growth.

The discount rate applied to the estimated future cash flows reflects an estimate of the weighted-average cost of capital of comparable companies.

The quantitative goodwill impairment analysis for the Germany reporting unit indicated that the estimated fair value of the reporting unit was less than the carrying value.

T he implied fair value of the goodwill associated with the reporting unit approximated zero, thus requiring a full impairment charge of the goodwill carrying value of the reporting unit.

A s such, a goodwill impairment charge of $ 1.5 million was recognized for the three and nine months ended October 31, 2020, which is included in the impairment of goodwill amount in the consolidated statements of operations.

The impairment charges arose as the result of lowered expectations of the future financial performance of this reporting unit.

The Company's assumptions about future financial performance were impacted by the current year operating performance of this reporting unit and by the anticipated impact that challenging industry conditions, including COVID-19, may have on the future financial performance of this reporting unit.

There were no goodwill impairment charges for the three and nine months ended October 31, 2019 .

Indefinite-Lived Intangible Assets

The Company's indefinite-lived intangible assets consist of distribution rights assets.

The following is a summary of the changes in indefinite-lived intangible assets, by segment, for the period ended October 31, 2020:

Agriculture Construction International Total

(in thousands)

January 31, 2020 $ 6,070 $ 72 $ 1,870 $ 8,012

Arising from business combinations 195 — — 195

Foreign currency translation — — 97 97

Impairment — — ( 858 ) ( 858 )

October 31, 2020 $ 6,265 $ 72 $ 1,109 $ 7,446

The Company performs at least an annual impairment testing of its indefinite-lived distribution rights intangible assets and, due to ongoing losses and the impact of COVID-19, an interim test was completed in the third quarter of fiscal 2021 for our Germany assets.

Under the impairment test, the fair value of distribution rights intangible assets is estimated based on a multi-period excess earnings model, an income approach.

This model allocates future estimated earnings of the store/complex amongst working capital, fixed assets and other intangible assets of the store/complex and any remaining earnings (the "excess earnings") are allocated to the distribution rights intangible assets.

The earnings allocated to the distribution rights are then discounted to arrive at the present value of the future estimated excess earnings, which represents the estimated fair value of the distribution rights intangible asset.

The discount rate applied reflects the Company's estimate of the weighted-average cost of capital of comparable companies plus an additional risk premium to reflect the additional risk inherent in the distribution right asset.

The results of the Company's impairment testing for the Germany distribution rights intangible assets for the quarter ended October 31, 2020, indicated that the estimated fair value of the tested distribution rights was below the carrying value of such assets, thus requiring an impairment to be recognized.

Impairment charges of $ 0.9 million were recognized for the three and nine months ended October 31, 2020 and included in the Impairment of Intangibles and Long-lived assets amount in the consolidated statements of operations.

The impairment charges arose as the result of lowered expectations of the future financial performance of this reporting unit.

There were no indefinite-lived intangible impairment charges for the three and nine months ended October 31, 2019 .

During the three months ended April 30, 2021, the Company identified no such asset groups and no impairment was recorded .

For the three months ended April 30, 2020, the Company recognized an impairment charge of $ 0.2 million within its Construction segment.

NOTE 7 - FLOORPLAN PAYABLE/ LINES OF CREDIT

15 unchanged sentences

Amounts outstanding are recorded as long-term debt, within long-term liabilities on the consolidated balance sheets, as the Company does not have the intention or obligation to repay amounts borrowed within one year.

As of October 31, 2020, the Company had floorplan lines of credit totaling $ 765.0 million, which is primarily comprised of three significant floorplan lines of credit:

As of April 30, 2021, the Company had floorplan lines of credit totaling $ 770.0 million, which is primarily comprised of three significant floorplan lines of credit:

(i) a $ 450.0 million credit facility with CNH Industrial, (ii) a $ 185.0 million line of credit under the Bank Syndicate Agreement, and (iii) a $ 60.0 million credit facility with DLL Finance LLC.

As of October 31, 2020 and January 31, 2020, the Company's outstanding balances of floorplan lines of credit consisted of the following:

October 31, 2020 January 31, 2020

As of April 30, 2021 and January 31, 2021, the Company's outstanding balances of floorplan lines of credit consisted of the following:

April 30, 2021 January 31, 2021

(in thousands)

CNH Industrial $ 91,402 $ 86,792

Bank Syndicate Agreement Floorplan Loan 49,750 —

Wells Fargo Floorplan Payable Line — 82,700

DLL Finance 9,788 10,667

1 unchanged sentence

$ 169,108 $ 161,835

As of October 31, 2020, the interest-bearing U.S.

floorplan payables carried various interest rates ranging primarily from 2.25 % to 3.07 %, compared to a range of 4.05 % to 4.81 % as of January 31, 2020.

As of October 31, 2020, foreign floorplan payables carried various interest rates primarily ranging from 1.20 % to 4.84 %, compared to a range of 0.86 % to 7.66 % as of January 31, 2020.

As of October 31, 2020 and January 31, 2020, $ 164.6 million and $ 205.2 million, respectively, of outstanding floorplan payables were non-interest bearing.

As of October 31, 2020, the Company had a compensating balance arrangement under one of its foreign floorplan credit facilities, which requires a minimum cash deposit to be maintained with the lender in the amount of $ 5.0 million for the term of the credit facility.

NOTE 9 - SENIOR CONVERTIBLE NOTES

The Company's senior convertible notes matured, and the outstanding principal balance of $ 45.6 million was repaid in full, on May 1, 2019, and as such there was no interest expense for the three and nine months ended October 31, 2020 and three months ended October 31, 2019.

For the nine months ended October 31, 2019, the Company recognized $ 0.8 million in interest expense associated with its senior convertible notes.

As of April 30, 2021 and January 31, 2021, the U.S.

floorplan payables were generally all non-interest bearing.

As of April 30, 2021, foreign floorplan payables carried various interest rates primarily ranging from 1.40 % to 4.81 %, compared to a range of 1.40 % to 4.82 % as of January 31, 2021.

As of April 30, 2021 and January 31, 2021, $ 120.2 million and $ 98.8 million, respectively, of outstanding floorplan payables were non-interest bearing.

As of April 30, 2021, the Company had a compensating balance arrangement under one of its foreign floorplan credit facilities, which requires a minimum cash deposit to be maintained with the lender in the amount of $ 5.0 million for the term of the credit facility.

NOTE 8 - LONG TERM DEBT

The following is a summary of long-term debt as of October 31, 2020 and January 31, 2020:

Description Maturity Dates Interest Rates October 31, 2020 January 31, 2020

The following is a summary of long-term debt as of April 30, 2021 and January 31, 2021:

Description Maturity Dates Interest Rates April 30, 2021 January 31, 2021

(in thousands)

Mortgage loans, secured Various through May 2039 2.1% to 5.1%

$ 43,413 $ 22,916

Sale-leaseback financing obligations Various through December 2030 3.4% to 10.3%

Bank Syndicate Agreement - Revolver Loan April 2025 2.25% 10,000 10,000

16,172 16,505

Vehicle loans, secured Various through June 2026 1.7% to 3.9%

3 unchanged sentences

Long-term debt, net $ 64,868 $ 44,906

The Company purchased buildings and real estate assets of eleven of its U.S.

dealer locations in the first quarter of fiscal 2022 and financed these purchases with long term debt of $17.7 million.

These dealer locations were previously leased from third party lessors.

NOTE 9 - DERIVATIVE INSTRUMENTS

5 unchanged sentences

The Company's foreign currency forward contracts generally have three-month maturities, maturing on the last day of each fiscal quarter.

No foreign currency contracts were outstanding as of January 31, 2020.

The notional value of outstanding foreign currency contracts as of October 31, 2020 was $ 7.0 million.

As of October 31, 2020, the fair value of the Company's outstanding derivative instruments was not material.

The notional value of outstanding foreign currency contracts as of January 31, 2021 was $ 8.0 million.

There were no outstanding foreign currency contracts as of April 30, 2021.

As of January 31, 2021, the fair value of the Company's outstanding derivative instruments was not material.

Derivative instruments recognized as assets are recorded in prepaid expenses and other in the consolidated balance sheets, and derivative instruments recognized as liabilities are recorded in accrued expenses and other in the consolidated balance sheets.

The following table sets forth the gains and losses recognized in income from the Company’s derivative instruments for the three and nine months ended October 31, 2020 and 2019.

Gains and losses are recognized in Interest and other income (expense) in the consolidated statements of operations:

Three Months Ended October 31, Nine Months Ended October 31,

2020 2019 2020 2019

The following table sets forth the gains and losses recognized in income from the Company’s derivative instruments for the three months ended April 30, 2021 and 2020.

Gains and losses are recognized in Interest and other income in the consolidated statements of operations:

Three Months Ended April 30,

(in thousands)

Foreign currency contract gain (loss) $ 471 $ ( 3 ) $ 660 $ 365

Foreign currency contract loss $ ( 351 ) $ ( 13 )

NOTE 10 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the periods ended October 31, 2020 and October 31, 2019:

The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the periods ended April 30, 2021 and April 30, 2020:

Foreign Currency Translation Adjustment Net Investment Hedging Gain Total Accumulated Other Comprehensive Income (Loss)

3 unchanged sentences

Balance, April 30, 2021 $ ( 3,591 ) $ 2,711 $ ( 880 )

Other comprehensive income 778 — 778

Balance, July 31, 2020 ( 5,681 ) 2,711 ( 2,970 )

Other comprehensive income 2,181 — 2,181

Balance, October 31, 2020 $ ( 3,500 ) $ 2,711 $ ( 789 )

Foreign Currency Translation Adjustment Net Investment Hedging Gain Total Accumulated Other Comprehensive Income (Loss)

3 unchanged sentences

Balance, April 30, 2020 ( 6,459 ) 2,711 ( 3,748 )

Other comprehensive income 1,012 — 1,012

Balance, July 31, 2019 ( 4,810 ) 2,711 ( 2,099 )

Other comprehensive loss ( 2,650 ) — ( 2,650 )

Balance, October 31, 2019 $ ( 7,460 ) $ 2,711 $ ( 4,749 )

NOTE 11 - LEASES

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The components of lease expense were as follows:

Three Months Ended October 31, Nine Months Ended October 31,

Three Months Ended April 30,

Classification 2021 2020

(in thousands) (in thousands)

(in thousands)

Finance lease cost:

4 unchanged sentences

Variable lease cost Operating expenses 613 635

Sublease income Interest and other income (expense) ( 136 ) ( 146 ) ( 419 ) ( 468 )

Sublease income Interest and other income ( 197 ) ( 152 )

$ 4,781 $ 5,544

Right-of-use lease assets and lease liabilities consist of the following:

Classification October 31, 2020 January 31, 2020

Classification April 30, 2021 January 31, 2021

(in thousands)

8 unchanged sentences

Total lease liabilities $ 82,951 $ 98,073

(a) Finance lease assets are recorded net of accumulated amortization of $2.6 million as of October 31, 2020 and $1.5 million as of January 31, 2020.

Maturities of lease liabilities as of October 31, 2020 are as follows:

(a) Finance lease assets are recorded net of accumulated amortization of $2.0 million as of April 30, 2021 and $3.0 million as of January 31, 2021.

Maturities of lease liabilities as of April 30, 2021 are as follows:

Operating Finance

11 unchanged sentences

Present value of lease liabilities $ 79,654 $ 3,297 $ 82,951

The weighted-average lease term and discount rate as of October 31, 2020 are as follows:

October 31, 2020

The weighted-average lease term and discount rate as of April 30, 2021 are as follows:

April 30, 2021

Weighted-average remaining lease term (years):

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Revenue generated from leasing activities is disclosed, by segment, in Note 3.

The following is the balance of our dedicated rental fleet assets, included in Property and equipment, net of accumulated depreciation in the consolidated balance sheet, of our Construction segment as of October 31, 2020 and January 31, 2020:

October 31, 2020 January 31, 2020

April 30, 2021 January 31, 2021

(in thousands)

3 unchanged sentences

NOTE 12 - FAIR VALUE MEASUREMENTS

As of October 31, 2020 and January 31, 2020, the fair value of the Company's foreign currency contracts, which are either assets or liabilities measured at fair value on a recurring basis, was not material.

As of April 30, 2021 and January 31, 2021, the fair value of the Company's foreign currency contracts, which are either assets or liabilities measured at fair value on a recurring basis, was not material.

These foreign currency contracts were valued using a discounted cash flow analysis, which is an income approach, utilizing readily observable market data as inputs, which is classified as a Level 2 fair value measurement.

The Company also valued certain long-lived assets at fair value on a non-recurring basis as of October 31, 2020, A pril 30, 2020, and January 31, 2020 as part of its long-lived asset impairment testing.

The estimated fair value of such assets as of October 31, 2020, April 30, 2020, and January 31, 2020 was $ 0.5 million, $ 0.4 million, and $ 2.8 million, respectively.

The Company also valued certain long-lived assets at fair value on a non-recurring basis as of January 31, 2021 as part of its long-lived asset impairment testing.

The estimated fair value of such assets as of January 31, 2021 was $ 0.8 million.

Fair value was estimated through an income approach incorporating both observable and unobservable inputs, and are deemed to be Level 3 fair value inputs.

2 unchanged sentences

The Company also has financial instruments that are not recorded at fair value in the consolidated balance sheets, including cash, receivables, payables and long-term debt.

The carrying amounts of these financial instruments approximated their fair values as of October 31, 2020 and January 31, 2020.

The carrying amounts of these financial instruments approximated their fair values as of April 30, 2021 and January 31, 2021.

Fair value of these financial instruments was estimated based on Level 2 fair value inputs.

NOTE 13 - INCOME TAXES

Our effective tax rate was 28.3 % and 33.8 % for the three months ended October 31, 2020 and October 31, 2019 and was 26.5 % and 31.3 % for the nine months ended October 31, 2020 and October 31, 2019.

Our effective tax rate differs from the domestic federal statutory tax rate due to the impact of state taxes, the mix of domestic and foreign income or losses, the impact of the recognition of valuation allowance on certain of our foreign deferred tax assets, including net operating losses, the impact of foreign currency fluctuations on our Ukrainian business and discrete events that take place throughout the year, primarily the tax impact of share based payments.

Our effective tax rate was 22.9 % and 28.1 % for the three months ended April 30, 2021 and April 30, 2020.

The effective tax rate for the three months ending April 30, 2021 was benefited by the vesting of share-based compensation.

For the three months ending April 30, 2020, the effective tax rate benefited from a weakening hryvnia in our Ukrainian business but was offset by increased tax expense on the vesting of share-based compensation.

NOTE 14 - BUSINESS COMBINATIONS

6 unchanged sentences

The recognition of these inventories and the associated financing liabilities are not included as part of the accounting for the business combination.

On January 1, 2019, the Company, through its German subsidiary, acquired certain assets of ESB Agrartechnik GmbH ("ESB").

ESB is a full-service agriculture equipment dealership in Eastern Germany.

Our acquisition of ESB further expanded our presence in the German market.

The total consideration transferred for the acquired business was $ 3.0 million paid in cash.

This acquisition was recognized in the fiscal year ended January 31, 2020 as the acquisition occurred within our International segment in which all entities maintain a calendar year reporting period.

On October 1, 2019, the Company acquired certain assets of Uglem-Ness Co.

The acquired business consisted of one Case IH agriculture equipment store in Northwood, North Dakota.

The service area is contiguous to the Company's existing locations in Grand Forks and Casselton, North Dakota and Ada, Minnesota.

The total consideration transferred for the acquired business was $ 10.9 million paid in cash.

In connection with the acquisition, the Company acquired from CNH Industrial and certain other manufacturers equipment and parts inventory previously owned by Uglem-Ness Co.

Upon acquiring such inventories, the Company was offered floorplan financing by the manufacturer.

In total, the Company acquired inventory and recognized a corresponding financing liability of $ 7.4 million.

The recognition of these inventories and the associated financing liabilities are not included as part of the accounting for the business combination.

Purchase Price Allocation

Each of the above acquisitions has been accounted for under the acquisition method of accounting, which requires the Company to estimate the acquisition date fair value of the assets acquired and liabilities assumed.

The accounting for all business combinations was complete as of October 31, 2020.

The following table presents the aggregate purchase price allocations for all acquisitions completed during the nine months ended October 31, 2020 and twelve months ended January 31, 2020:

October 31, 2020 January 31, 2020

The above acquisition has been accounted for under the acquisition method of accounting, which requires the Company to estimate the acquisition date fair value of the assets acquired and liabilities assumed.

The accounting for the purchase price allocation was complete as of January 31, 2021.

The following table presents the aggregate purchase price allocations for all acquisitions completed as of January 31, 2021:

January 31, 2021

(in thousands)

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Intangible assets 245

Goodwill 484 1,198

Liabilities assumed:

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Agriculture $ 484

Construction — —

International — 499

Goodwill expected to be deductible for tax purposes $ 484

The recognition of goodwill in the above business combinations arose from the acquisition of an assembled workforce and anticipated synergies expected to be realized.

For the business combinations occurring during the twelve months ended January 31, 2020, the Company recognized a customer relationship intangible asset of $ 0.2 million, a non-competition

intangible asset of $ 0.1 million, and a distribution rights intangible asset of $ 1.6 million.

For the business combinations occurring during the nine months ended October 31, 2020, the Company recognized a non-competition intangible asset of $ 0.1 million, and a distribution rights intangible asset of $ 0.2 million.

The customer relationship and non-competition assets will be amortized over periods ranging from three to five years.

The recognition of goodwill in the above business combination arose from the acquisition of an assembled workforce and anticipated synergies expected to be realized.

For the business combination occurring during the twelve months ended January 31, 2021, the Company recognized a non-competition intangible asset of $0.1 million and a distribution rights intangible asset of $ 0.2 million.

The non-competition assets will be amortized over periods ranging from three to five years.

The distribution rights assets are indefinite-lived intangible assets not subject to amortization.

The Company estimated the fair value of the intangible assets using a multi-period excess earnings model, which is an income approach.

Acquisition related costs were not material for the nine months ended October 31, 2020 or 2019, and have been expensed as incurred and recognized as operating expenses in the consolidated statements of operations.

Acquisition related costs were not material for the fiscal year ended January 31, 2021, and have been expensed as incurred and recognized as operating expenses in the consolidated statements of operations.

NOTE 15 - CONTINGENCIES

On October 11, 2017, the Romania Competition Council (“RCC”) initiated an administrative investigation of the Romanian Association of Manufacturers and Importers of Agricultural Machinery (“APIMAR”) and all its members, including Titan Machinery Romania.

The RCC's investigation involves whether the APIMAR members engaged in anti-competitive practices in their sales of agricultural machinery not involving European Union ("EU") subvention funding programs, by referring to the published sales prices governing EU subvention funded transactions, which prices are mandatorily disclosed to and published by AFIR, a Romanian government agency that oversees the EU subvention funding programs in Romania.

The investigation is in a preliminary stage and the Company is currently unable to predict its outcome or reasonably estimate any potential loss that may result from the investigation.

The Company is also engaged in other legal proceedings incidental to the normal course of business.

The Company is engaged in legal proceedings incidental to the normal course of business.

Due to their nature, such legal proceedings involve inherent uncertainties, including but not limited to, court rulings, negotiations between affected parties and governmental intervention.

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Certain financial information for each of the Company’s business segments is set forth below.

Three Months Ended October 31, Nine Months Ended October 31,

2020 2019 2020 2019

(in thousands) (in thousands)

Three Months Ended April 30,

(in thousands)

Agriculture $ 229,554 $ 193,627

9 unchanged sentences

Total $ 13,679 $ 3,148

October 31, 2020 January 31, 2020

April 30, 2021 January 31, 2021

(in thousands)

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements